Obtaining Audit Evidence Research Articles

Sources and methods of obtaining audit evidence. Audit documentation

Sources and methods of obtaining audit evidence. Audit documentation

A Review of the PCAOB's Enforcement Program: 2005–2017

SUMMARY This study examines the PCAOB's Division of Enforcement from 2005 to 2017, a time period when it expanded from a $5 million to a $22 million program area. We find that a pronounced increase in disciplinary orders issued during the latter years of the sample period is attributable to serious audit deficiencies and misconduct by triennially inspected audit firms, non-U.S. audit firms, and firms auditing brokers and dealers. We also find that more than two-thirds of the violations of PCAOB auditing standards described in these disciplinary orders pertain to failures in general audit principles and responsibilities, obtaining audit evidence, and review and communication. Finally, we find that the PCAOB levies punitive sanctions on an overwhelming majority of audit personnel and audit firms cited in these disciplinary orders. Overall, our results indicate that the PCAOB's enforcement function has actively disciplined audit personnel and audit firms that breached their professional obligations. Data Availability: Publicly available.

Approaches for Obtaining Audit Evidence at Fair Value Measurement

Approaches for Obtaining Audit Evidence at Fair Value Measurement

Obtaining reasonable assurance on cyber resilience

Purpose The purpose of this paper is to highlight the potential of cyber-testing techniques in assessing the effectiveness of cyber-security controls and obtaining audit evidence. Design/methodology/approach The paper starts with an identification of the applicable cyber-testing techniques and evaluates their applicability to generally accepted assurance schemes and cyber-security guidelines. Findings Cyber-testing techniques are providing insight in the effectiveness of the actual implementation of cyber-security controls, which may significantly deviate from the conceptual designs of these controls. Furthermore, cyber-testing techniques could provide concise input for cyber-risk management and improvement recommendations. Originality/value The presented cyber-testing techniques could complement traditional process-oriented assurance techniques with specialized technical analyses of real-world implementations that focus on the adversaries’ viewpoint.

Процедурне забезпечення доказовості професійного судження в контексті дотримання якісних характеристик фінансової звітності

The article is devoted to the formation of procedural provision in the process of fulfilling an audit task in order to substantiate the evidence of audit judgment regarding management's compliance with the basic principles and quality characteristics when preparing financial reporting in accordance with International Financial Reporting Standards. The basic principles – assumptions and qualitative characteristics were considered, which are contained in the Conceptual Framework for Financial Reporting. Analysis of the definition of the concept in literary sources shows that the principle is the rule of behavior, the beginning, the basis of any system, and the essence of this concept was considered. It was established that the criteria for the auditor's assessment of the assertions of managerial personnel regarding compliance with the basic principles – assumptions and qualitative characteristics, are determined by the conceptual basis of financial reporting accepted by the enterprise. The short list of issues to be audited was given. The objectives of the audit procedure were defined, a list of issues was considered, an understanding of which is important for the auditor when choosing and planning audit procedures. The goal and procedural provision for obtaining audit evidence necessary for the formation of interim conclusions regarding the observance by management of basic principles and qualitative characteristics in the preparation of financial statements has been formed. Examples of possible intermediate conclusions of the auditor were given. It was determined that the audit procedures provide evidence of audit judgment regarding the observance by management of the principles and qualitative characteristics in the process of drawing up financial statements. The audit procedures are the basis of the chosen audit methodology and are carried out in certain order and sequence determined by the auditor. It was indicated that it is expedient to apply auditing methods tested in practice in a separate audit firm; it will minimize the risk of non-detection, as well as reduce the time for completing the audit task.

Audit Evidence Supporting Going Concern of a Company

The information base providing the audit evidence of going concern of a company is studied. The requirements on the quantity and quality of the audit evidence to be obtained by the audit of financial statements are determined. Particular attention is paid to the procedural provision for the assessment of the risk of company termination in the foreseeable future. In view of the current auditing practice, auditors demand the extension and adaptation of the going concern when preparing financial statements by management personnel, provisions and recommendations of the respective standard for solving problems related with the methodology for testing the validity of the abovementioned assumptions. The article’s objective is to study, systematize and implement provisions of International Standards on Auditing (ISA) and general theoretical organization and methodical approaches to obtaining audit evidence of the going concern of a company.
 According to ISA, the auditor’s purpose is to develop and fulfill the audit procedures in a manner allowing him to obtain the audit evidence that is sufficient and appropriate for formulating justified conclusions laying the ground for the auditor’s opinion.
 A literature review shows that the modern theoretical and methodological framework of audit does not offer methodological tools for the effective assessment of the economic performance of a company for purposes of defining the termination risks. A study of the issue of testing the validity of the application of the going concern when preparing financial statements shows that the auditors are required to be competent in indicative economic parameters and items of financial statements, reflecting, first and foremost, the economic capabilities and economic performance of a company. 
 The study of the application of the procedural provision recommended by ISA for identification and assessment of indicative performance parameters of a company is used to develop a combination of audit procedures and methods for evaluating the results of their implementation, which allows for the reliable assessment of the risk of the company’s termination in the foreseeable future.

Basic Audit Data Analytics with R

Accounting professors, students and many auditors need readily available, non-proprietary training material on audit data analytics (ADA). This need was identified at the panel discussion on data analytics at the AAA meeting in San Diego (August 2017). Several attendees stated that they need materials (instructions, cases, data, and code) to first train themselves in the basics of ADA and then use the same materials to teach the topic in their classes. In addition, feedback from a survey contracted by the CPA Canada Audit Data Analytics Committee (Hampton and Stratopoulos 2016) indicated that, outside of the big four public accounting firms, there are relatively limited opportunities for training existing auditors in the use of data analytics. “Basic Audit Data Analytics with R” is intended to meet the need noted above. The training uses the software R because it is open-source (free) and it provides virtually endless possibilities to those who learn it. The cases, including practice problems, use comprehensive large data sets for an entire company accessed from the HUB of Analytics Education. Millions of data points are updated regularly. The primary learning objective is to provide trainees with capabilities required to perform entry level ADA. This means that - given a set of well-defined objectives and a reasonably clean data set - those who have successfully taken the training should have an understanding of how basic data analytics can be effectively applied in a aspects of a financial statement audit. These basics include: 1. Setting ADA objectives. Identify aspects of audit where the audit team can use data analytics tools to obtain audit evidence. 2. Data Understanding: Identify sources of data, collect and extract data, become familiar with data structure, identify data quality issues. 3. Data Preparation: Be able to clean and transform data to enable effective and efficient analysis. 4. Modeling: Explain the model underlying the ADA in plain English. 5. Evaluation: Leverage statistical and logical techniques to evaluate how valuable a model is, what has been found, and what to do with the results. 6. Communication and Documentation: Communicate and document the results of the ADA and use new insights obtained to help answer questions and solve problems.

Сучасні аспекти аудиту основних засобів.

In this article, the peculiarities of the organization and methodology of the audit of fixed assets at enterprises are considered, taking into account the provisions of international auditing standards (ISA). The definition of the category "fixed assets" is given. The basic tasks and stages of the audit of fixed assets, especially its carrying out, have been formed. The main sources of obtaining audit evidence in accordance with the ISA, their completeness and sufficiency in the audit of fixed assets are investigated.

Financial statement networks: an application of network theory in audit

Auditors use predictive models to estimate financial account values in a financial statement. Prior studies suggest that incorporating organizational knowledge into these models yields better predictive accuracy. We propose a novel method to con- struct a financial statement network in order to gain insight into the organizational structure of a company using real financial transaction data from ten companies. We show that real data yields financial statement networks of varying complexity. We introduce a method to aggregate the nodes and edges of the financial statement net- work, which results in its visualization at the right level of tractability. We also show that this visualization enables the auditor to assess the complexity of the organizational structure of a company and to use it as a risk indicator for the audit. Further, the obtained network yields insights into the monetary flow between financial accounts and business processes. We show that this information can be used to add organizational knowledge to predictive models for the purpose of obtaining audit evidence.

The use of generalised audit software by internal audit functions in a developing country: The purpose of the use of generalised audit software as a data analytics tool

This article explores the purpose of the use of generalised audit software as a data analytics tool by internal audit functions in the locally controlled banking industry of South Africa. The evolution of the traditional internal audit methodology of collecting audit evidence through the conduct of interviews, the completion of questionnaires, and by testing controls on a sample basis, is long overdue, and such practice in the present technological, data-driven era will soon render such an internal audit function obsolete. The research results indicate that respondents are utilising GAS for a variety of purposes but that its frequency of use is not yet optimal and that there is still much room for improvement for tests of controls purposes. The top five purposes for which the respondents make use of GAS often to always during separate internal audit engagements are: (1) to identify transactions with specific characteristics or control criteria for tests of control purposes; (2) for conducting full population analysis; (3) to identify account balances over a certain amount; (4) to identify and report on the frequency of occurrence of risks or frequency of occurrence of specific events; and (5) to obtain audit evidence about control effectiveness.

Characteristics of the internal audit and external audit hours: evidence from S. Korea

Purpose Using 5,055 sample firm-years in Korea between 2009 and 2013, this paper aims to examine the association between the characteristics of the internal audit and the number of external audit hours as a proxy for audit efficiency. Design/methodology/approach This study is motivated by the International Standard on Auditing No. 610: “Using the work of internal auditors”. This auditing standard guides external auditors in using the work of internal auditors to obtain audit evidence and consult internal auditors for direct assistance. The authors expect that external audit efficiency will increase when the work of competent internal auditors is used. Findings The authors find that the number of internal auditors relative to the number of employees is associated with the number of external audit hours. This result suggests that the greater the availability of internal auditors, the greater their contribution will be to the financial statement audit and the more efficient the audit. The authors find evidence that external auditors use the work of internal auditors with accounting and legal expertise to improve audit efficiency. They also find some evidence that the work of internal auditors with greater availability is more effective during initial external audit engagements. Originality/value This study adds to the extant literature on the contributions of internal auditors to external audits by using archival data and by measuring audit effort using a large database of audit hours. In addition, our findings have practical implications for firms and external auditors who are evaluating the role and value of using the work of internal auditors. The authors also believe that the findings will be of interest to regulators or auditing standards boards.

IMPROVEMENT THE EFFECTIVENESS OF INTERNAL AUDITING OF THE QUALITY MANAGEMENT SYSTEM

To maintain the quality management system (QMS) of the company in working condition and continuously improvement its efficiency, auditors must continually improve and enhance all processes of the organization. In identifying priorities, optimization is consider an effective advantage of the internal audit. Internal audit - the main tool for evaluating the effectiveness of the quality management system. Standard ISO 9011 defines audit as a systematic, independent and documented process to obtain audit evidence and evaluating it objectively to determine the extent to which audit criteria. The requirement to conduct internal audits of quality management system contained in p. 8.2.2 ISO 9001: 2011.

Affairs of the Association

Affairs of the Association Whitle Penn REPORT OF INDEPENDENT AUDITORS To the Board of Directors of the Texas State Historical Association We have audited the accompanying financial statements of Texas State Historical Association, which comprise the statements of financial position as of August 31, 2014 and 2013, and the related statements of activities, and cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”); this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America, Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Texas State Historical Association as of August 31, 2014 and 2013, and the results of its activities and its cash flows for the years then ended in conformity with GAAP. Dallas, Texas January 26, 2015 [End Page 99] TEXAS STATE HISTORICAL ASSOCIATION STATEMENTS OF FINANCIAL POSITION August 31, 2014 2013 Assets Cash and cash equivalents $ 33,237 $ 117,993 Investments 739,129 290,062 Receivables 72,376 62,832 Grant receivables, net 1,570,185 1,064,050 Pledges receivable 182,076 161,013 Inventory 105,695 110,008 Prepaid expenses and other assets 11,930 12,775 Fixed assets, net 1,793 2,849 Endowment investments 2,609,109 2,288,477 Total assets $ 5,325,530 $ 4,110,059 Liabilities and Net Assets Accounts payable and accrued liabilities $ 90,476 $ 106,142 Line of credit 350,000 - Total liabilities 440,476 106,142 Net assets (deficiency): Unrestricted (367,269) (439,198) Temporarily restricted 1,417,745 909,186 Permanently restricted 3,834,578 3,533,929 Total net assets 4,885,054 4,003,917 Total liabilities and net assets $ 5,325,530 $ 4,110,059 See accompanying notes to financial statements. [End Page 100] TEXAS STATE HISTORICAL ASSOCIATION STATEMENT OF ACTIVITIES Year ended August 31, 2014 Unrestricted Temporarily Restricted Permanently Restricted Total Revenue, gains, and other support: Publications and other sales $ 307,614 $ - $ - $ 307,614 Investment income 262,419 255,976 649 519,044 Contributions and grants 260,837 745,300 750,000 1,756,137 Association activities 132,805 - - 132,805 Membership fees 216,204 - - 216,204 Educational activities 58,074 - - 58,074 Contributed facilities and services 137,789 - - 137,789 Philosophical society 73,153 - - 73,153 Awards 15,900 - - 15,900 Other income 106,135 - - 106,135 Permanently restricted funds released by donor - 450,000 (450,000) - Net assets released from donor and program restrictions 942,717 (942,717) - - Total revenue, gains, and other support 2,513,647 508,559 300,649 3...

METODI I PROCESI REVIZIJE FINANSIJSKIH IZVJEŠTAJA

The objective that the author wanted to achieve in this paper is to highlight the responsibilities of auditors and management of legal persons that appear in the audit of financial statements. Independent audit plays a key role in the organization markenting economy and is an essential factor in preserving the stability of economic and political system country. Audit was promoted the first time in the Montenegrin legislation regulations on 2005. The Law on Accounting and Auditing introduces audit institution in: companies, banks, insurance companies, stock exchanges and stock. Changes and amendments to the Law on Accounting and Auditing MNE were published in the Official Gazette of Todorovic Z. Metodi i procesi revizije finansijskih izvjestaja FBIM Transactions Vol.2 No.1 pp.66-81 Published: January 2014 MESTE 67 Montenegro (Official Gazette of RM 69 / 05 and Official Gazette of Montenegro 80/08, and 32/11), that compliance with EU Directives and IAS / IFRS and ISA, as well as the Code of Ethics of IFAC. Special attention in this paper addresses the analysis and the basic components of the audit process: claims management on the financial statements, audit evidence as a basis for the audit opinion; procedures used to obtain audit evidence as well as working papers of audit procedures performed.

The Impact of ISO 9001 Certification Audit on Oil and Gas Organizations’ Performance in Qatar

Quality Auditing is a systematic, independent and documented process for obtaining audit evidence and evaluating it objectively to determine the extent to which audit criteria are fulfilled. The purpose of this paper is to find out the impact of ISO 9001 certification audit on oil and gas companies’ performance in Qatar. More than 100 oil and gas companies have been certified ISO 9001. Therefore, it is necessary to study and analyze the impact of that certification on their performance. Survey study has been done by distributing a questionnaire by e-mail or by handing it personally to most of the certified oil and gas companies in Qatar. The response rate was 33.6% of surveyed companies. The statistical operations with the results of analytical study have been done to achieve the goal and objectives of the research. Finally, ISO 9001 certification audit is found to have a positive effect on oil and gas companies’ performance in Qatar.

Obtaining Audit Evidence for Assessing Companies’ Ability to Continue as a Going Concern, Using Duration Models

According to The International Standards on Auditing , the purpose of the auditor in an audit engagement is to express an independent, objective and a professional opinion regarding the accuracy of the financial statements of the companies audited. During his mission, the auditors must also assess the company’s ability to continue as a going concern , with a major impact on the preparation and the quality of financial statements that are reported. To support his opinion, regarding the hypothesis of going concern , the auditor must obtain sufficient and appropriate audit evidence, and perform the necessary audit procedures. For that, analytical procedures ensure a series of comparative information at the level of analyzed periods or branch, useful to the auditor in the audit engagement. The present study aims to obtain a deterministic model based on duration models, for assessing the audited companies’ ability to continue as a going concern . The research results are useful to the auditor in the assessment of the audited company’s compliance with the going concern assumption , in preparation of financial statements. The analysis was performed on a sample of 77 companies quoted on the Bucharest Stock Exchange that were subject to the insolvency risk, in the period 2008-2011. To obtain the research results, data were treated with statistical software SPSS 19.0.

Challenges Obtaining Audit Evidence

This paper discusses the problems associated with the collection of audit evidence in an Information Technology (IT) environment. There has been a profound shift regarding the nature of audit evidence; more than 90% of the documents are now digital. A study was conducted years ago which showed that 80% of audits failed due to poor audit evidence ( Beasley, Carcello, & Hermanson, 2001). With the new age of computers, what’s the chance the percentage is even higher now?

AN INVESTIGATION OF AUSTRALIAN AUDITORS’ USE OF THE MANAGEMENT REPRESENTATION LETTER

Auditors’ use of the management representation letter has assumed renewed significance because Australian, UK, US and International auditing guidelines recommending that auditors obtain appropriate representations from management have now been adopted as standards. Results from this exploratory survey confirmed that auditors’ use of the representation letter to obtain audit evidence was generally consistent with the professional guidance, but two anomalies were noted. First, one-third of respondent auditors did not use the letter to provide sole audit evidence. Comments from some auditors indicated doubt about the legal acceptability of such evidence. While past litigation might justify such caution, auditors should consider whether it is efficient to neglect the use of the management representation letter to provide primary audit evidence. Second, there was evidence that some auditors use management representations as sole audit evidence when other appropriate audit evidence is available. This suggests the need to inform these auditors about the danger of over-reliance on management representations. Finally, results showed that most auditors use the representation letter to inform management of their responsibilities. This informative use is consistent with professional guidance and with the corporate governance literature that recommends clarifying management’s understanding of their responsibilities and enhancing management’s sense of accountability. This informative use is most important to auditors belonging to smaller audit firms, and suggests that these firms’ clients have greater information needs.